How to toggle/highlight interactable items?
Duplicate Mesh Outline

Have a mesh to be outlined:




shift+d to get a copy of the object and the mesh (give it
appropriate names) 
ut: Make Single User "Materials + Tex", to get
separate materials (give them appropriate names)
tab enter edit mode
select all vertices 
alt+s fatten the mesh e.g by 0.1. The resulting mesh should be larger than the original. 

w + flip normals to make the faces show inside
tab to leave edit mode


As the outline should have an "aura" effect, I suggest to chose a shadeless material with "Add" Alpha. The color should be pretty dark. Otherwise it will hide the background too much.



This results in a semi-transparent "glowing" effect. 

While it looks strange in the preview the game engine will show you a nice outline.

 

PS: Thanks to Satish Goda (youtube) I know now how to enable backface culling. Therfore I suggest following additional settings:


parent the hover to the original object
make the hover unselectable
 in Properties enable Shading/Backface Culling




This is the effect. Now you can think about logic that switches it on and off. 

Hint: you can even fade it by playing material actions.

I hope it helps